8% Annual Growth, Eightfold Expansion An 'Imaginable Goal' For India, Says Larry Summers
Summers stated that Indian economy has the potential to grow eightfold between now and 2050 and achieve an 8% a year growth rate.
Former United States Treasury Secretary Larry Summers stated that the Indian economy has the potential to grow eightfold between now and 2050 and achieve an 8% annual growth rate.
India's GDP grew to 7.2% in FY23 and is expected to grow 6.5% in the current fiscal year, according to the Reserve Bank of India estimates, in what will be a year marred by slow global growth.
Summers delivered a lecture organised by the Finance Ministry and Confederation of Indian Industry in New Delhi on Saturday and noted that the suggested growth hinges on reforms in some states, addressing energy-related infrastructure needs, and more effective public sector performance.
"...I think this is a reasonable thing to say that a stretched target, an ambitious goal, a possible aspiration for India is an eight-fold growth between now and the end of the half-century. 8% a year, which isn’t my forecast on current policy, but given India’s potential even in the more challenging world economy, I believe that is an imaginable goal," he said.
He further explained that the eightfold expansion would have a transformative impact and could serve as a target for India in the current century.
Summers, along with the chairperson of India's 15th Finance Commission, N. K. Singh, has co-chaired an expert committee report on MDB reform that was comissioned under India's G20 Presidency.
The first part of the report calls for a triple mandate and to increase sustainable lending levels by 2030, along with creating a third funding mechanism that would allow to engage with investors willing to support elements of the MDB agenda.
A second part of the report is expected to be submitted and discussed at the last G20 finance ministers and central bank governor's meeting in October under India's presidency.
Higher Interest Rates Not Necessarily A Barrier To Growth
Summers also fielded audience questions, where he was asked if continued monetary tightening would hinder economic growth.
"I would be surprised if higher (interest rates) for longer proved to be a major barrier to growth, and I would worry about that. I don’t expect this to take place, but if monetary policies were pursued and they failed to contain inflation, then you would be setting the stage for much higher interest rates and a much more serious recession down the road," he cautioned.
State V/s Centre Government
Commenting on challenges to the 8% growth possibility, Summers noted that some barriers that exist have to do with the nature of federalism.
"...there are still ranges of restrictions and problematic policies in a number of key regions in India that, if addressed constructively, would unlock enormous potential," he said.
Summers noted that a combination of free market forces addressing infrastructure needs, particularly in energy, addressing questions of reform in a number of key states, and a more effective public sector could generate growth at the rate he suggested.
He further added, "Obviously, it is also going to depend on what happens in the global economy, but there is at least the possibility that artificial intelligence, an area in which India ought to find ways to excel given its facility with information technology, may be a bit of an accelerant to global growth in the years ahead."